Ladies and gentlemen, welcome to the Lufthansa Group 2024 Annual Results Conference Call and Live Webcast. I'm Moritz, the Chorus Call operator. I would like to remind you that all participants will be in a listen-only mode, and the conference is being recorded. The presentation will be followed by a question-and-answer session. You can register for questions at any time by pressing star and one on your telephone. For operator assistance, please press star and zero. The conference must not be recorded for publication or broadcast. At this time, it's my pleasure to hand over to Marc-Dominic Nettesheim, Head of Investor Relations. Please go ahead, sir.
Thank you very much. And also from my side, a very warm welcome, ladies and gentlemen, to the presentation of our Full-Year Results 2024. With me on the call today are our CEO, Carsten Spohr, and our CFO, Till Streichert. They will both present our results for last year and discuss our commercial outlook for this year. Afterwards, you will have the opportunity to ask your questions. And like always, I want to ask you to limit your questions to two so that everybody has a chance to participate in the Q&A session. Thanks in advance. And now I hand over, Carsten, to you.
Yeah, thank you, Marc. And it's a warm welcome from my side to our Analysts Conference for 2024. The year, which you know and surely will discuss over the next hour, is a year filled with ups and downs. And it was a year ago when we presented the third-best financial result ever in our history to you. And nevertheless, already at that time, though, we were facing significant labor issues, disputes, infrastructure issues in Germany. And it's not surprising, probably, to all of you that the economic consequences of these impacts did change or have a significant impact on the course of 2024, especially on our core brand, Lufthansa Airlines. By contrast, though, the other airlines within the group and Lufthansa Technik were able to continue their positive development into 2024 out of 2023. Some of them even finished with new record results.
Ultimately, due to the disappointing performance of our core brand, we did fall short of our targets we had set ourselves for 2024. Nevertheless, I'm talking with some confidence and optimism today because we have initiated a turnaround in multiple ways, which already led to significant improvements also on the financial side in the fourth quarter of last year. It was by far the strongest quarter in the reporting period. For the first time in 2024, with an adjusted EBIT reaching EUR 468 million, we were able to improve our previous year's result in Q4 by EUR 66 million. Therefore, we look back today on a year of two distinctive halves, which is particularly evident in our earnings performance. While we had a decline of EUR 974 million in adjusted EBIT in the first half of the year, EUR 450 million by strikes alone, the trend improved significantly in the second half.
As a result, we were able to carry the momentum from the fourth quarter of 2024 into a very strong start of 2025. In mid-January, we finally completed, let's start with that, the acquisition of initially 41% stake in ITA Airways. This is the largest airline acquisition in our history and indeed a real milestone in the further development of our group and it's also another important step towards our further internationalization, which is a key strategic target. Secondly, we have significantly improved our operational stability. Last year, for various reasons, we were not always at the quality level we strive to offer our customers, particularly in Munich and Zurich, partly also in Frankfurt. However, this situation has already improved significantly in the fourth quarter of the reporting year.
And now, in January and February, our teams, especially our operational teams, had their best operational start since the last 10 years. At the start of the year, we made significant progress in customer satisfaction thanks to this strong operational performance. And maybe even more importantly, we see the increasing impact of our significant investments in premium quality. There's no question beyond the progress made in the fourth quarter of 2024 and the strong start into 2025. For our core brand, though, which, as you know, is our largest and most vital revenue driver, we urgently need an economic turnaround. And of the group's EUR 1 billion decline in adjusted EBIT, more or less 95%, EUR 950 million were driven by Lufthansa Airlines, our core brand. That highlights, what I just said, the urgent need for decisive action.
We quickly recognized the challenges at the Lufthansa Airlines during the spring of 2024 and therefore took decisive action with an upbeat turnaround program in the middle of the year to realign the course of and for our core brand. Details of that turnaround program will be presented by Till in just a moment. The conditions for the program's success are highly favorable. The global aviation industry continues to be on a strong growth path. According to forecasts from the International Air Transport Association, as you know , IATA, more than five billion passengers will travel by air for the first time ever this year, and industry revenues are also expected to surpass the EUR 1 trillion mark for the first time. Our passenger airlines leveraged this strong demand for air travel also last year and expanded their capacity by 9% compared to the previous year.
Nevertheless, of this quite significant growth, we were able to sell all that growth and had a record-breaking summer even with load factor peak values reaching up to above 90%. Our revenues increased by 6% to EUR 37.6 billion. That marks a new record. For the first time ever, we generated revenues exceeding EUR 10 billion in two consecutive quarters in quarter three and quarter four of last year. Bottom line, we closed the past year with an adjusted group EBIT of somewhat more than EUR 1.6 billion. Swiss exceeded the adjusted EBIT mark of EUR 800 million for the second time. Eurowings repeated its good results from the previous year again and achieved an adjusted EBIT of above EUR 200 million. Brussels Airlines even achieved the highest profit in their history with EUR 60 million. Austrian achieved an adjusted EBIT slightly above that of EUR 76 million.
Lufthansa Technik increased their EBIT once again to a new high of EUR 635 million. 2024 was also a very strong year for cargo, at least in the end of the year, with adjusted earnings of EUR 251 million, of which EUR 199 were generated in the mentioned fourth quarter alone. Lufthansa Airlines closed the year with a loss of EUR 94 million. And in contrast to the other passenger airlines, sorry, which performed quite well, this is obviously a very disappointing result, but it also allows me to make a comment because sometimes we had discussions in the last years if we need other airlines in the group, if we need other hubs outside of Germany, other brands, and I think it's quite impressive with all the disappointment we have on Lufthansa Airlines.
We'll be talking about how we turned this around quickly, that we are now able to make EUR 1.6 billion for the group without a single euro contribution from the core airline. I think also for us, 10 years ago, this would have been inconceivable. The success of the necessary turnaround will be driven by our ability to allocate capacity even more strategically, focusing on areas where we can deploy it profitably and expect stable returns. We do that in two dimensions. One is geographically. The other one is according to the competitiveness of the AOC, which I will come to in a minute. Let's start with geographics. We continue to see very strong demand on the North Atlantic with a robust and sustained market there. As a result, we experienced disproportionate and profitable growth on these routes last year.
At the same time, we faced a significant disadvantage to competitors on the long-range sides towards the east, who, unlike us, can use Russian airspace, saving money, fuel, and travel time for their passengers, and as a result of that, we saw a reduction in our capacity for Asia. We will continue to adjust our capacity according to those challenges to make sure we optimize our profits. Within Europe, we have further expanded our leading position. In our home continent, we achieved average or above-average growth and once again benefited from our increased focus on the leisure travel segment. We also see further potential in the Southern Hemisphere. The expansion of our multi-hub system by ITA or by Munich, if I might say, will be particularly beneficial there in the Southern Hemisphere for the two of the largest economies in Latin America, Brazil and Argentina.
Also, our offering will double by the integration of ITA. However, the allocation of capacities is not only based on market conditions. The cost structure of our airlines, as mentioned before, are also decisive in determining where we utilize capacities profitably. Over the past year, with the City Airlines, we have made the feed and de-feed system more competitive again. And this year, and also in the following years, the fleet will be expanded. And we do this actually this year by one airplane per month. A real success story is also Discover Airlines, which is continuing to expand. Just four years old, Discover will have already 30 aircraft this year, eight of which will be based in Munich. It's growing to 2,000 employees and flies to 80 destinations already in 26 countries.
Lufthansa City Airlines and Discover, they are both key drivers for the turnaround in our hub operations in Munich and Frankfurt and obviously therefore important for the turnaround of our core brand. With that, I'll hand over to Till, who will take you through the details of these figures, and later on, I'll be back to you before we then look forward to your questions.
Thank you, Carsten, and hello as well from my side. Thank you for joining us today to discuss our full year results and the financial outlook for 2025. So in 2024, revenue developed positively and grew by 6%, driven by high demand in all of our business segments. Our operating cost increased by around 9% at the same time, driven by high cost inflation in most categories. Despite a higher production, we had EUR 150 million less fuel cost due to a lower average fuel price. However, our total material cost grew by 10%. The increase was driven by higher MRO cost and an increase in fees and charges of around 12%. Staff cost increased by around 8%, driven by higher tariff agreements and an increase in headcount. The applied measures for operational stabilization additionally impacted productivity levels, especially at Lufthansa Airlines.
Irregularity cost increased substantially, driven by the severe strikes in the first quarter and the general operational instability caused by the need to operate an older fleet, as well as capacity limitations at system partners. In summary, they amounted to more than EUR 840 million last year, an increase of around 70%. In total, our adjusted EBIT in the full year amounted to EUR 1.6 billion, a decline of around 40% to prior year. We clearly cannot be happy with this development, but one positive aspect to note: after the difficult start into 2024, we experienced a significant improvement in the second half of the year, where Swiss, Austrian, Brussels Airlines, and Eurowings all achieved a better result than previous year. In total, the result of these four airlines was over 20% higher than 2023.
In the fourth quarter, revenue growth outpaced cost growth, operations stabilized, and Lufthansa Cargo recorded a fantastic Q4, resulting in a group-adjusted EBIT, which exceeded the prior year by EUR66 million. Our net income for the full year amounted to EUR1.4 billion, and we want our shareholders to participate in this result and will therefore propose dividend payment of EUR 0.30 per share at our Annual General Meeting in May, in line with our dividend policy. This results in a payout ratio of 26% compared to 21% last year and represents a dividend yield of almost 5% based on our year-end share price. Let us now take a closer look at our passenger airlines business. In 2024, we grew our capacity by 8.5%, still a substantial figure, but significantly below the 2023 capacity growth of around 16%.
The overall growth rate was mainly driven by the first two quarters, in which we grew by more than 10%. Growth was significantly reduced in the second half of the year, with a clear focus on stabilizing yields and increasing operational stability. These adjustments quickly paid off, and in the fourth quarter, we achieved stable yields compared to previous year's level, and for the full year, the yield decreased by 2.6%. Seat load factor was stable on a full-year basis and above prior year in the second half of the year. RASK declined by around 4.3%, driven by a high Irreg impact, as EU261 compensation is booked as negative revenue. In addition, the prior year Q4 included a significantly positive one-off effect due to the release of ticket provisions still related to the COVID years.
Our stable load factor clearly demonstrates that we are in a healthy demand environment, especially when it comes to leisure travel. You can also see this at our point-to-point carrier, Eurowings, which already operated at 112% capacity compared to the pre-pandemic levels, the highest figure in the group. Regarding profitability, Swiss clearly stands out, delivering a strong 12.4% margin in 2024. As mentioned before, in the second half of the year, the adjusted EBIT of all passenger airlines increased compared to the previous year, with one exception, and this is Lufthansa Airlines, our largest group airline. Lufthansa Airlines did not deliver a positive margin in 2024, and we've commented on the causes for this decline before: inefficiencies and complexity, operational instability, also due to capacity shortages at service partners, a high rate of technical cancellations due to older aircraft and strikes.
All of this increased the irregularity cost and burdened productivity. Given such low productivity, also the increase from tariff agreements is weighing or has been weighing on our results, as well as the high location cost in Germany. This shows that both the Lufthansa turnaround plan and the fleet renewal, which Carsten will talk about later, are critical for returning Lufthansa Airlines to a successful path. But let me first comment on our turnaround program. Our approach to the turnaround program has a clear logic. First, we focus on stabilizing our operations, and once this has been achieved, we can increase efficiency to then realize the full financial potential of the program. Looking at the progress we made, we are well on track. We have identified all necessary measures. There are two-thirds relating to cost improvements, the rest to revenue enhancements.
By 2026, we anticipate a gross adjusted EBIT effect of approximately EUR 1.5 billion, with a further increase to EUR 2.5 billion in 2028. Let us now have a look on what has been achieved and what lies ahead of us. First, we already see tangible progress in the stabilization of our operations. The measures we've taken triggered an improvement of our punctuality rate, and we achieved a regularity rate of 99% in the first two months of 2025. This is a significant improvement compared to last year, even after excluding the strike effect. To achieve this, we adjusted processes, staff levels, and schedules. We continue in our efforts to stabilize the system, for example, by insourcing ground services at Munich Airport and thus enhancing control over a critical part of the value chain.
Stable operations means less irregularity cost, and for 2025, we expect a reduction of EUR 100-EUR 200 million from that. Secondly, we are shifting capacity growth to the more efficient AOCs. In 2025, we are adding 15 aircraft to City Airlines and Discover, which are significantly more cost-efficient than our main airline. For example, crew unit cost of these platforms is about 30% lower. And to realize the benefits from our multi-hub strategy, we are not only shifting aircraft, but also shifting routes. Connecting our hubs is increasingly being done by more cost-efficient airlines such as ITA operating Munich-Milan or Austrian operating Frankfurt-Vienna. And thirdly, there's a broad range of measures to improve efficiency and increase revenue. We expect double-digit million EUR savings in 2025 from higher fuel efficiency, an increase in digitalization, and the renegotiation of contracts.
On the revenue side, we will operate eight routes from Munich with a new Allegris cabin in 2025, and this number will only go up as new aircraft get delivered, resulting in higher yields and an increase in ancillary revenue. All of these measures are designed to further enhance our operational efficiency, improve quality, and reduce complexity. They're not only about cutting costs. They aim to create a more resilient and agile organization, which will position Lufthansa Airlines for long-term success. Let's now turn to our other business segments, Lufthansa Cargo and Lufthansa Technik. Lufthansa Cargo is looking back at another very successful year. The adjusted EBIT of EUR 251 million represents not only an increase of EUR 32 million or almost 15% compared to last year, but also a slight increase in operating margin.
The main driver of the positive trend is the strong Asian e-commerce business, which provides us with sustainable profits due to the long-term contracts we've concluded. Our large freighter fleet will allow us to react to shift demands, to react to demand shifts quickly, and we've increased our focus on Asia. Ten 777 freighter flights per week are allocated to the Asia-Pacific region, and we are now even connecting Asia and the U.S. market directly. In the fourth quarter, which is typically the strongest in air freight, we exceeded even our already ambitious expectations, and Cargo delivered an adjusted EBIT of EUR 199 million, making a record result when excluding the COVID-related boom years of 2020 - 2022. Yields also increased, increased by 11% versus prior year, and the air freight market appears to have normalized at a higher than pre-crisis level, and Lufthansa is well positioned to benefit from this.
Moving on to Lufthansa Technik, we see an adjusted EBIT of EUR 635 million, a result slightly above prior year's level, and the demand for MRO services continues, driven by the general airline industry growth and ongoing delivery delays for new aircraft, resulting in older aircraft flying longer, triggering higher maintenance needs, and as a result, Lufthansa Technik signed new customer contracts already with a volume of around EUR 7.5 billion in 2024. In 2024, cost inflation also impacted margin growth at Lufthansa Technik, and with an increasing share of new or renegotiated customer contracts, the negative inflation impact on margins is expected to fade away. As part of our Ambition 2030 plan, we've launched several strategic initiatives, including the establishment of a new facility in Portugal and a 15-year multi-billion dollar agreement with WestJet.
This agreement includes the expansion of Lufthansa Technik's operations by establishing a state-of-the-art engine maintenance and test facility in Calgary. Also, on the recruitment side, we are making progress. We've recruited over 1,600 new employees, and once they are fully trained, we expect a significant ramp-up in productivity. Given these strategic pillars, we are confident that Lufthansa Technik is on track to grow and improve its profitability in the midterm, as we've shown to you in our Capital Markets Day last year. Let's turn to cash flow. Overall, our cash flow developed in line with our adjusted EBIT. Our operating cash flow amounts to EUR 3.9 billion, which is EUR 1 billion below prior year. This decrease primarily results from the corresponding decline in our operating result. Gross CapEx includes the cash out for 80 new aircraft, which was partially offset by 15 sale and lease-back transactions and cash investment inflows.
As a net figure, CapEx stands at EUR 2.7 billion and is therefore slightly below previous year's level. Overall, our adjusted free cash flow thus decreased in line with the operating cash flow and stands at EUR 840 million. In 2024, we maintained the strength of our balance sheet due to our positive free cash flow. Net debt remained stable year on year at a level of EUR 5.7 billion, and our net pension liability decreased slightly, driven by a positive performance of our pension assets. Due to the decrease in operating result, the ratio of net debt to EBITDA increased from 1.7 times to 2.0 times by the end of 2024. And of course, we remain committed to retaining a full investment-grade rating and further strengthened our rating profile by issuing a hybrid bond at the beginning of 2025.
When it comes to fuel, we observed a favorable pricing dynamic during the last weeks of 2024, and going forward, the outlook also appears promising. Our fuel bill for the full year 2025 is projected to be about EUR 7.9 billion, and it includes around EUR 200 million for the mandatory 2% SAF quota in the European Union, which affects roughly three-quarters of our departures. In total, this represents only a slight increase compared to the previous year, despite higher fuel consumption and the share of mandatory SAF. For the year 2025, we have already hedged 79% of our fuel needs, with 83% hedged for passenger airlines. Please keep in mind that our option-based hedging approach protects us from potential price escalations to some extent, while allowing us to benefit from price declines. As we look ahead, 2025 will be a year of transition for us.
We anticipate a moderate capacity growth of around 4% compared to the previous year, and this is expected to support revenue growth, secure profitable market share, strengthen yields, and help to stabilize our operations further. Even though we expect demand to remain strong in all our business segments, also in 2025, we will face negative headwinds. Among those are effects of aircraft delivery delays and cost increases, including personnel costs, fees, and charges at our system partners, as well as ESG-related expenses. Despite these headwinds, we expect our adjusted EBIT for 2025 to increase significantly compared to 2024. While we expect an increase in operating result on the cash flow side, we expect adjusted free cash flow to be stable versus prior year due to higher net CapEx, which we expect to amount to between EUR 2.7 billion and EUR 3.3 billion.
Aircraft delivery delays remain a cause of uncertainty, and of course, in case of unforeseen changes, this may have an impact on CapEx and also our adjusted free cash flow. While 2025 will be a transition year, we expect to see more material improvements from 2026 onwards, driven by higher fixed cost degression, productivity gains, fleet renewal, and efficiency gains from our Lufthansa Airlines turnaround program. Later this year, we want to share more information on the progress we are making and provide you with an update on our strategy and targets. Therefore, I am excited to announce that we will be holding a Capital Markets Day this year in autumn. And now, I hand back to Carsten, who will provide you with our perspective on fleet and customers, as well as some thoughts on the strategic outlook for this year.
Yeah, thanks. So before we come to our Q&A session, let me give you somewhat of a strategic outlook, and let me start with our fleet development. The fundamental bottlenecks, you're all aware of, of the manufacturers in our industry have stayed with us over the past year, and they will probably continue to affect us until the end of the decade. Most prominent among the ongoing challenges in our industry is the shortfall of, by now, 41 Boeing long-haul aircraft, which were originally supposed to be operating already in the year of 2024. Of these aircraft, 15 787s are still waiting certification for the seats in Charleston, South Carolina. However, though, after last week's certification test, we are now carefully optimistic that we will be able to deploy these aircraft in the summer on mid-haul routes with some of the business class seats still blocked.
Overall, we expect 26 deliveries to our airlines in our group over the course of the year, so new aircraft every two weeks, and the order list in total comprises a total of 240 aircraft, including 100 long-haul aircraft, which is for us a historic number. We will regenerate our long-haul fleet by four years by the end of the summer of 2028, which is the largest jump ever we have had in this segment or in this fleet optimization we are now going through for many years. There's also a positive effect, by the way, on the freight side, significantly higher cargo load capacities, at least at the edge of the network. For example, cargo capacity is double in that regard from a 747-400 to a 777-9.
Starting from the summer schedule, excuse me, all routes from Munich to the U.S. will either be flown by A350s with the new Allegris cabin or by one of our popular Airbus A380s, and in 2025, we will therefore also see the commercial impact from Allegris, especially from the differentiated marketing of our Allegris cabin, and bookings for the premium suite and for the additional seat options in the business class especially are already surprising our expectations. The feedback across all classes, first business, premium economy, and economy, is quite positive. It's very positive and is surpassing our already quite positive expectations. Furthermore, there have been numerous digital advancements and new developments across the group, many of which have since been repeatedly recognized as industry benchmarks, such as automated compensation for flight errors.
This is where our Digital Hangar model is of, allowing us to introduce solutions across all airlines once they have been developed. Ladies and gentlemen, let me close by saying that the Lufthansa Group structure is unparalleled. There is no other airline group which unites as many national carriers and brands under one roof, and this Vielfalt , as we call it, mirrors the distinctive and beloved character of our home continent, Europe, and not having a large homogeneous home market like London or Paris may have been seen as a disadvantage historically, but it has ultimately shaped our unique strength and adaptability, and we grew up within this federal structure, which has always demanded solutions, innovative solutions to compensate for this competitive disadvantage.
And with our multi-hub, multi-airline, and multi-brand strategy, we have found the answer, an answer that has made us the world's largest airline group outside the U.S. in terms of revenue and fleet size. A former limitation has transformed into a strength because we have the competence, the culture, the processes to seamlessly integrate airlines into this network. And the ongoing integration of ITA is a prime example, but I'm sure in Lisbon and Madrid, people are also paying close attention to how we are developing our group. We are constantly learning and improving every day, no doubt, but for example, with the group-wide One IT project, which now aims to standardize our digital infrastructure, we're moving another big step forward. This helps us to make the benefits of our group even easier and smoother in terms of experience for our customers.
With this goal in mind, we're implementing a new umbrella brand strategy this year because already today, more than half of our connecting passengers within the group travel with more than one of our airlines and therefore with more than one of our brands, and they benefit from the very complementary route network, which we have established over the years. They benefit from shared ground infrastructure. They benefit from anything from check-in kiosks to call centers of our, well, for example, our world-leading app, which is already the same before the all-hub airlines, and under this Lufthansa Group umbrella brand, we will make the connection between the individual brands and their interaction within the airline group more transparent and clearly recognizable. Ladies and gentlemen, next year, Lufthansa will be celebrating its founding in 1926.
Ever since then, our mission has been connecting people, cultures, and economies in a sustainable way. In a world that seems to be growing increasingly complex, yet rich in opportunities, this mission remains as relevant as ever. Now, more than ever, it is important that air travel fosters international understanding, facilitates exchange, promotes mutual comprehension, and drives economic prosperity. This is what more than 100,000 people work for every day. For right now, also on behalf of them, thanks for listening. Now, Till, I look forward to your questions.
Ladies and gentlemen, we will now begin the question and answer session. Anyone who wishes to ask a question may press star and one on their telephone. You will hear a tone to confirm that you have entered the queue. If you wish to remove yourself from the question queue, you may press star and two.
Questioners on the phone are requested to disable loudspeaker mode while asking a question. In the interest of time, please limit yourself to two questions. Anyone who has a question may press star and one at this time. One moment for the first question, please. The first question comes from Jarrod Castle from UBS. Please go ahead.
Thank you. Must be my lucky day. It was the same with Air France. Three, if I may, can you give any color what significant means? I mean, you're flying in 2025, 95% of 2019's capacity, and you did the EUR 2.7 billion in 2023 when you were doing 85%. Then, I guess at the very least, we're adding back the strike. So just any color, and obviously, if you are flying 11%-12% more capacity, is all of that loss-making, basically, when you compare it to 2023?
And then just on its own, I mean, obviously, it sounds like, obviously, the integration process began. When do you think you might or might not trigger the other 59% that you don't sorry, 49% that you don't own? And what are some of the things you're looking for in the roadmap? And then lastly, update on TAP, if you can just give a bit of color there. Thanks.
I'll make a start in terms of your first question, or maybe also leaning into the second one in terms of ITA. But first, on the significant, to be just very clear, we are looking here at double-digit growth compared to 2024. This is very clear. We are foreseeing moderate capacity growth. We've said about 4%. We're looking at currently, and we've started seeing that in the fourth quarter at a favorable market environment.
As I said before, in the fourth quarter, yields actually started to stabilize. And as we look into 2025, we are seeing actually an increase in yields, which as such is positive. And of course, I do expect as well that in 2025, and I think the slide that we've shown in terms of turnaround is giving you already a bit of an idea of what we expect in terms of positive contribution just from the Lufthansa Airlines turnaround flowing into the numbers, helping us to offset. And let me be clear as well on that. We do have some cost headwinds, which we communicated already last year, which result from the tariff increases that we had concluded in 2024. And of course, one of the elements which is weighing on us are cost related to the location here in Germany, including also fees and charges that are going up.
All of this together, once again, I do expect significant improvement in 2025, which clearly is a double-digit growth. And the fuel environment that we are currently looking at is also favorable and supporting.
Yeah, just a quick one on the M&A activities. As you probably know, we are able to call 49%, getting us to 90% as early as this summer. Currently, there's no decision yet if we will do so. And that occasion comes up again next summer in 2026. And there will be a balance of upsides of having the Italian government on board versus to have the company consolidated. And these two things will be a balance to each other. On TAP, there's no update, but what you maybe have seen in the news, the government is having a difficult time in Lisbon.
As I said before, on calls like this, I believe that the privatization of TAP will probably take a little bit longer than what some people expected. There's no surprise that we are interested, but I don't expect any news from this front for quite some time. M&A, I prefer to talk about when it's happening.
Right. Thanks very much.
The next question comes from Ruxandra Haradau-Döser from HSBC. Please go ahead.
Good afternoon. Thank you for taking my questions. First, what is the current status with respect to the feeder contract with Condor? My understanding is that you canceled the agreement at the end of last year, but I'm not sure if this has been implemented given the letter from the European Commission beginning of this year pointing to a limitation of competition over the Atlantic.
Second, could you please give us an update on the NPS trend at Lufthansa Airlines in 2024? What is the target in terms of NPS for 2025? And what is the difference in terms of net promoter score between Lufthansa Airlines and Swiss? Thank you.
Yeah, good morning. This is Carsten, Ruxandra. On the first topic, Condor, we actually canceled the agreement as early as 2020. And then we were initially by the German authorities and then later on by a German court not allowed to put that cancellation into effect. Now the German higher court has overruled that decision, and we were able to put that cancellation into effect on December 24 of last year. The EU Commission has provided us some questions and advising us that they might be having an investigation against this.
They fortunately now informed us last week that that investigation is finished and is closed. Therefore, we will be keeping our termination in place as it has been since December 24. And we already see significant reduction of Condor transfer passengers on our airplanes because we need those seats for ourselves, which we are now legally allowed to use. On the second topic, we are sorry, that was NPS. Yeah, well, the one thing I will tell you is that the NPS jumped up 10 points over this winter, which is an amazing jump and shows that the stabilization of operations in Frankfurt, Munich is cherished by our customers. But we have decided to no more externally communicate actual NPS values because our competitors don't either. Fair enough that Till has to give you the guidance for this year, which nobody else does.
But on the NPS, we think there's no value in sharing that data with the public when our competitors don't.
Thank you. Thank you very much. Maybe one more question, if I may. You mentioned that business class seats on the new 787s will be blocked. Could you please give some more details on this? Thank you.
Yeah, as I mentioned before, there's 40 or 15 airplanes sitting in Charleston purely for the lack of certification by the FAA. So if we now find a compromise that we can bring those airplanes into service and just need a few of the business class seats remain to be blocked because these are the only seats where there's no certification available yet, it would make sense for us to fly these aircraft, train our pilots, and basically ramp up for eventually getting the certification for all seats, of course.
So there might be airplanes flying as early as this summer with some of the business class seats only blocked. All other compartments and some of the business class seats are certified.
Okay, great. Thank you very much. Thanks.
And the next question comes from Jaime Rowbotham from Deutsche Bank. Please go ahead.
Morning, everybody. Two from me, please. Firstly, Carsten, on previous calls with German GDP languishing, understandably, you've reminded us how the international non-German exposure of the group is material and growing. I just wonder, given the potential boost to the German economy that could come from the various stimulus measures that are now being considered, whether it'll soon be time to remind us just how German the group is. The question, though, is to understand what you make of the potential fiscal policy changes.
Is it all potential good news for Lufthansa, given the upside implications for domestic GDP? Or could there be some negatives? For example, if the infrastructure spend was geared towards road and rail, perhaps that could impact negatively the short-haul demand. Any thoughts, please? And then the second one may be for Till. Till, of the EUR 950 million decline in Lufthansa EBIT, the airline EBIT, as per slide five, 370 of it, or 40%, came in H2, so not really linked to strikes. In terms of the underlying trends at the Lufthansa Airline, so ignoring the boost that you'll hopefully get from no further strikes in H1, when do you expect the year-on-year profit trend to inflect positive for this carrier specifically, given your comment that 2025 will be a transition year? Thanks, guys.
Hello. Carsten. First, yeah, indeed, the number you know, because you and I talked about this before, is that the Lufthansa Group has come down to less than 25% of revenue from Germany in 2024. If you now add current developments, that number continues to go down, and ITA on top, we will now even reach less than 20% of revenue generated in Germany in 2025, and another fun fact, in the summer of 2025, for the first time, we will have more aircraft in our hubs outside of Germany than in our two German hubs of Frankfurt and Munich. That's what we call the internationalization moving forward, and that's the math, but now coming to your second question, indeed, this unheard stimulus the new German government will probably provide, of course, will have an effect on the growth of the German economy. At least that's what all experts expect.
To answer your question, is this good news for Lufthansa? I think I would summarize it. This is good news for Lufthansa. It's good news for Lufthansa shareholders, but bad news for my grandchildren. Somebody has to pay back that debt. I don't have grandchildren yet, by the way.
On your second question in relation to Lufthansa Airlines, so you're quite right in terms of the phasing and the analysis for 2024. Let me just say for 2025, I do expect that the Lufthansa Airlines business will going to turn positive. And of course, throughout the year now, with the phasing, the negative comparative in the first half of the year, as we travel through the year, I do expect that we move positive. And on a full-year basis, that should apply as well.
Okay. Thank you, gentlemen.
And the next question comes from Harry Gowers from J.P. Morgan. Please go ahead.
Yeah, good afternoon, gents. First question, probably one for Till, just on the ex-fuel costs for 2025. Obviously, no explicit guidance figure provided. So maybe you could give us some rough sense in terms of the quantum of the increase for the year and to be refrained on guiding just because of delivery uncertainty in terms of the aircraft coming in. And then second question is on Asia-Pacific. I was wondering what the EBIT contribution or presumably EBIT loss for that market was in 2024. And if we do see a ceasefire coming, how are you thinking about the reopening of the Russian airspace and the impact that it might have financially for that market? Thanks a lot.
Look, on the CASK ex-fuel, we have stayed away from providing exact guidance.
But of course, you see cost inflation, the elements that I've mentioned before in terms of personnel cost. That alone, we've got about a 5% cost increase purely from the tariff agreements, which are known and in the public. You need to add the hirings that we've done, so you can probably add another 2%. If you think of fees and MRO, you certainly are on an above 10% increase year-over-year, which we've also indicated throughout last year impacting the year to come. So these are the building blocks when you construct the cost outlook for 2025. But again, all of that, including also the elements of ETS cost, for example, are included in our EBIT guidance. And I'm confident on the double digit in that regard.
On Asia, I think there's no such thing as one answer. China remains difficult for us for two reasons.
First of all, the geographic fact that we have larger distances to fly by avoiding Russian airspace, whereas the competitors on the other side don't, and as you well know, the Chinese airlines, one of them being our joint venture partner, are somewhat supported by their government and by their economy in terms of by Chinese, so I think that's two things on top. When it comes to India, the business is going very well. Also, Japan and other parts of Asia, for example, Thailand, are actually moving in the right direction. Opening of Russian airspace for sure would reduce our disadvantages towards the Chinese carriers and will significantly help us into Korea and Japan because we are strong in these markets and we will fly three hours less.
But on top, of course, of that Intercon impact, don't forget also Lufthansa was number one of all network airlines to Eastern Europe for many decades. So we were flying 100 flights per week into Ukraine before the terrible war started. And I would even think that with the rebuilding of Ukraine, the market will even grow beyond that. So we see significant business for us in Ukraine. And even Russia, we used to fly to 140 times a week before COVID. So let's see how that goes as well. So I think there's three question marks or call them opportunities when finally, hopefully, some kind of a peace or ceasefire is negotiated and airspace is open again.
All clear. Thank you both.
And the next question comes from Andrew Lobbenberg from Barclays. Please go ahead.
Oh, hi there. Carsten, I hope you're all right. You sound a bit like you've got a bit of a cough or a cold or something. I hope you're all right.
Can you talk to us a little bit about how your talks are going with Lufthansa mainline crew? I believe you're in discussions with them about productivity. How is that progressing and how do those talks balance with the outsourcing strategy to Discover and to City? And then my other question would be around cargo, I guess. Obviously, you had a super performance in the fourth quarter from the cargo business, but you are talking about strength of Asian e-commerce and that being locked in. But we see these de minimis rules being debated in the U.S. and in Europe that look to threaten these Asian e-commerce volumes. And separately, you even told us that it was great because you were flying between Asia and the U.S.
I'm not so sure whether tariffs make that market as vibrant as it has been. How should we think about the outlook for cargo and the potential cargo profitability into next year? Is that not a headwind?
Yeah, Andrew, good morning to you. On our crew talks, we are progressing there, but so far, let's say we have initiated talks, but so far, the unions insist on restrictions for our new AOCs, Discover Airlines and City Airlines, for potential improvements in the mainline. We are not willing to do that. We believe that our ability to allocate investments according to our ROCE logic, return on capital employed needs to be optimized, is an ultimate freedom we need to maintain.
Therefore, we are willing to discuss with the union the lowering of our crew cost, which mainly is an increase of productivity resulting in more airplanes at that AOC, but not at the cost of less airplanes somewhere else, because this could be additional growth, which we could afford to do by having lower costs. So that's a little bit why we have not progressed much there, because, again, we would not be trading short-term cost advantages to long-term strategic restrictions. And as you well know, we have done that in the late 1990s, and it took us 30 years to get out of it in terms of scope clauses. On cargo, I think it's a multidimensional topic. Let me start with the highest level of expectation. Cargo, air cargo, usually is needed most when things cannot be planned well in terms of supply chains.
So whenever there's a crisis in the world, usually cargo peaks. That's what's happening right now. The world has become much less predictable. That's why we see very strong cargo. And the wider world might be staying somewhat less predictable for some time. That's why, as Till said, some optimism for cargo also for 2025. On cargo trade lanes, the biggest trade lane for us is from Asia to Europe and from Europe to the U.S. And of course, Asia-Europe, I don't see much being affected. I think it's a matter of fact if the U.S. becomes more isolationist, maybe even the trade between China and Europe increases. That's for us the most important driver. And when it comes to the U.S., we have not been flying much out of the U.S. for some time, but we have been providing, especially the German car industry, with parts in the U.S.
Even if there are tariffs, the German car industry will probably even ramp up production of cars in the U.S. That might even drive further spare parts and those kind of things of our trade lane into the U.S. So it's a distant cargo. That's why I love it so much. So hard to predict. I don't see necessarily a pessimistic outlook of these developments, which might worry us in other ways. Coming back to your question, I don't think that cargo should have a negative impact. You do know that we even have a flight from Asia to the U.S., but it's a single flight from Saigon to Los Angeles. So in the overall framework of our dimension, I think that's an executable topic.
If I may add perhaps two points to that, also for 2025, I actually would expect that based upon what Carsten has described in terms of markets and dynamics, that we also see profitability expansion actually in cargo. That's the one element. And the second one is, of course, many of the new aircraft or new technology aircraft do come as well with more belly capacity, which does help on top. Fun fact for you, Andrew, as a former network guy, twice the cargo in the 777-9X as in the 744. I know you love this stuff.
Let's hope they build it and get it certified for you.
Come on, this is a long-term business.
Yeah, I know. Thanks.
So the next question then comes from Muneeba Kayani from Bank of America. Please go ahead.
Back on the irregularity costs and how do you see that for this year? So if you think about the improvement in performance in Jan-Feb, and if that kind of continues, where do you think that 840 lands up for the year? Kind of what's more normal for you? And then secondly, just on corporate travel, what are you seeing there? Where does it now compare with 2019 levels? Any sectors or geographies that you would highlight and how do you see it developing in 2025? Thank you.
Let me start off, Muneeba, let me start off with the question. So look, as we've highlighted, it is an essential part of our strategy to stabilize operations for everything that we can control.
Of course, you will always going to have events that are not controllable when it comes to weather and these kind of things that impact Irreg, no question. But the EUR 840 million are an unprecedented high level, and we know where it came from. And therefore, you could see on our turnaround slide how we quantified already. And that was just the Lufthansa Airlines side where we said about EUR 100 million-EUR 200 million positive contribution we would already expect from better operational stability and there with less Irreg cost. On corporate travel, corporate travel is at about 65% of pre-COVID capacity. Domestic in Germany is even less so. So that's at a level of about 50%. But we do see that long haul is better at higher levels, rather 65%-75%.
And of course, we've seen also recently some positive signs, in particular also North Atlantic travel and business customers there. So I would be cautiously optimistic that there's also a bit more upside in the corporate sector possible.
Thank you.
And the next question comes from Alex Irving from Bernstein. Please go ahead.
Good afternoon, and congratulations on the excellent progress. Two from me, please. The first returns to the topic of M&A a bit more broadly. Clearly, you've already done the stake in ITA. You've agreed to stake in airBaltic. You've been linked with TAP. You've been linked with Air Europa. I wouldn't expect you to plan to run four integrations simultaneously. So which are the biggest strategic priorities for you and why? Second question is around technology. You've seen two of your larger competitors have now announced a move to order management systems.
You've always been quite prominently at the forefront on technology progress, but how worried are you now about getting left behind in Europe with less ability to tailor content than some of those competitors and bearing ongoing high costs associated with operating legacy systems for longer? Thank you.
Alex, thanks for two good questions. On M&A, the clear priority is ITA, as you all know. ITA is 100 airplanes. It's about 11%-12% of additional capacity. Non-organic, of course, it's our most important market after the U.S. So this is where we focus on now. There is no such thing as airBaltic integration because all we are is a financial shareholder to support our quite large wet-lease cooperation. And both on TAP and Air Europa, I think it's too early to talk about anything. The processes haven't even started. So you're right.
Nobody can do four things at a time, but there is no need. We only have one right now called ITA. On distribution or order management systems, if I may say in all modesty, all potential suppliers are very interested to talk to Lufthansa due to our size. So I don't think that not being the first mover here is a disadvantage. We actually chose that path because we think there's more advantages in this and disadvantages. And of course, you don't get left behind with EUR 43 billion of turnover as a customer.
Thank you.
And the next question comes from Stephen Furlong from Davy. Please go ahead.
Oh, hi there. Yeah, Carsten, I enjoyed your comments at the start about making EUR 1.6 billion over EUR 1.6 billion with the mainline losing money, and you'd never seen that or would never see that a decade ago.
So my question really is not to reveal too much in terms of the CMD coming up, but do you think it's still a roadmap that the mainline business should be looking to achieve kind of high single-digit margins? And then the second question I have is just on continental traffic and trends into the summer. Do you think are consumers booking early or late? Does it look strong into the summer? Thank you.
Yeah, Stephen, thanks for that feedback because I talked about that many years, right? How many hubs should we operate? Are they too close to each other? Is it a downside to have overlapping hubs, or is it upside? So there is no single answer to this. I look forward to seeing you again over whatever lunch to discontinue that discussion.
But of course, one thing you know, just by whatever you want to call it, that little comfort that even without Lufthansa Airlines, we can make 1.6 is not taking our attention away from turning Lufthansa Airlines around. This is the core, and not just by financial importance, also the way we, as you know, we have taken a different road than IAG. We call ourselves the Lufthansa Group, not European Airline Group or anything artificial. So we will turn this around, and we will bring it to initially 8% as midterm targets. When we talk with you in the fall, hopefully at our Capital Markets Day, we will talk about the next midterm target path, but we need 8% to also justify investments. And why am I so optimistic of turning Lufthansa Airlines around?
First of all, coming back to Andrew's questions, I think our unions have understood that shrinking is not an option for them when the group at the same time can grow somewhere else. So the pressure is on them, not on us, to change that. Second, of the 100 wide- bodies we have ordered, 80, 8-0, will go to the Lufthansa Airline. So think about that increasing competitiveness, cost, cargo, all these arguments we already touched, and also, I would even go as far as saying that the new German government has understood that adding cost and cost and cost to the German hubs is not necessarily endangering Lufthansa as a group, but endangering the competitiveness of Germany as a global competitor in terms of our export strength. So I think there's some optimism for me that we'll turn this around. Booking patterns, we see overall a stable demand environment.
We even see intercontinental stronger in the outlook than Cont, especially in the North Atlantic, but also other markets, and so I believe there's also this big fair going on in Germany right now. If you follow that, I think the focus coming from the U.S. that consumers are willing to spend a higher share of their income on travel than before COVID continues.
Very good. Thank you.
And the next question comes from Ruairi Cullinane from RBC Capital Markets. Please go ahead.
Yeah, hi there. Ruairi Cullinane in RBC. Firstly, yeah, the contribution of reversal provisions was lower year on year in Q4 in 2024. That's something we should expect to continue, and then also on logistics, it was a very impressive incremental EBIT margin, close to 80% in the fourth quarter. What would you attribute that to, and what can we expect into next year? Thank you.
Yeah, Ruairi, just on the fourth quarter, probably you're referring to the comparison with 2023. 2023 fourth quarter did indeed benefit from still the reversal of unflown tickets in relation to the Corona backlog that was there, so we have been comparing, if you put it on a like-for-like basis, we've been actually comparing against a tougher comp, so to speak, with our fourth quarter, but from now on, I would expect, and we have been already for the last four quarters, pretty much in business as usual in that regard, so I wouldn't read or interpret there anything into it going forward, and the second question was cargo outlook, so once again, as Carsten, sorry?
Sorry, the incremental EBIT margin, it was the drop down to EBIT from revenues was very impressive. I was wondering what drove that, what we can expect into next year. Thanks.
Sorry, let me just ask you, are you asking us specifically for cargo or that was a general question or flow through? Because a general flow through, you would obviously expect cargo.
Yeah, yeah, logistics. Yeah, yeah, cargo. Yeah. Yeah, yeah.
No, look, I mean, logistics, as we said, when we last time spoke for the third quarter, we were actually still having a strong run ahead of us. And again, with the strong demand translating into good yields and volume for cargo, and with the lean cost structure that they've got, this was flowing through into EBIT. And I would also expect that you see kind of similar mechanics in the quarters to come. But again, it will be driven by demand eventually.
Thank you.
Then the next question comes from Jaina Mistry from Jefferies. Please go ahead.
Hi, thank you for taking my questions. My first question is around your cost benefits. I think you mentioned earlier in your presentation that Q4 2024 already benefited from some of the things that you've implemented. I wondered if you could quantify that and also tell us what we should expect in terms of progress for 2025. And then my second question is around EBIT. I know you mentioned double-digit growth. That could be anywhere from 10%-90%. But I guess, are you comfortable with consensus EBIT on EUR 1.9 billion in 2025? Thank you.
So look, I mean, obviously, you can derive the cost structure or kind of the cost to revenue from the fourth quarter margin that we are disclosing. So going forward, so we haven't specifically quantified for Q4 kind of the benefits that we've been deriving from the different initiatives on turnaround. So that's true. We haven't.
But we've given you for 2025 now an indication of what we are expecting. And we've given you also on the slide a few hints and indicators, starting off with the big contribution from reducing the Irreg cost to also the progression in terms of shifting to lower-cost productivity production platforms to also fuel efficiencies, not price-related, but efficiencies in that regard. So you can derive it a bit from there. Money-wise, and that is where we are very clear, and we've spoken about that. We do expect EUR 1.5 billion gross contribution in 2026, growing then to 2028 to EUR 2.5 billion. And what was your second question? Your second question was, okay, it's a double-digit EBIT growth. Okay, look, technically, yeah, you're right. Double-digit can give you a wide range.
But of course, you need to do a little bit of triangulation between what we've given you in terms of capacity growth, cost evolution, which I've given you, and equally kind of the positive yield evolution that I've spoken about. And you can see also in the market. And that could give you probably a good pointer towards what I mean when I speak about double-digit.
Yeah, it feels like consensus looks sensible on EUR 1.9 billion. Is that a fair assessment?
Look, let me not comment on the consensus. I think I've provided adequate components, which should allow to arrive at a reasonable range what we are targeting at.
Then today's last question comes from Antonio Duarte from Goodbody. Please go ahead.
Good morning, gentlemen. Thank you. And thank you for taking my questions. Three if I may. One touching on your MRO, so Lufthansa Technik business.
I've seen quite satisfactory revenue growth of about 14% year on year, if I'm not mistaken. In your CMD, you talked about a 7% CAGR until 2030. Could you please give us some light on how can we put these two numbers together and looking forward? And then moving a bit down the line in terms of your margins. You mentioned some pressure there that should fade with time. I noticed a one% increase in margin in Q4. How can we also think about this going forward? And then my second question, touching on yield performance, namely on the premium, if you could give us some light in terms of how you're feeling yields evolving into the Asia-Pacific region, if that's okay. Thank you very much.
Antonio, I'll start with the first one on the MRO business.
I mean, just at a higher level, when you think about it, there are about globally about $100 billion invested into new aircraft every year and about $100 billion on MRO spend. So this is just the dynamic growing at about, say, 2%-3% roundabout. And of course, you can see already with where we've been this year and also the capital markets kind of guidance that we pinpointed on 2030 that our ambition, and I think we've delivered that as well, is to grow above market. That's on the one hand side. Of course, it won't be linear. Let me say that as well. And there might be also kind of a bit of differences between the years or also the quarters as we go along.
But with the second element, which we also spoke about, EUR 7.5 billion already contracted in 2024 in terms of revenue volume or revenue, that's also an underpin to being on track in terms of the evolution. On the margin side, let me unpack that a little bit. It is true that agreements with inflationary cost mechanisms, of course, we are continuing to negotiate and also make sure that we pass on adequately the inflationary increases to our customer base that is necessary and unavoidable. And therefore, I would expect that over the quarters and years to come, this slight margin pressure will go away from that angle. And secondly, that's the other element which I'd like to highlight. Of course, we are also in a phase where we continue to invest into the business to grow. Portugal is an example. Calgary is the other example.
This, of course, in the beginning weighs a bit on your margin until basically you create the operating leverage. Your second question in terms of APAC, obviously, APAC is a heterogeneous area. What we did observe, however, is yield performance for premium was evolving significantly better than non-premium. So that's quite clear, and that's also what we see currently as we look forward. So there is a differentiation between premium and non-premium in favor of premium. That's quite clear, and I would also go one step further. As soon as we see more Allegris coming in, we should actually that being even stronger.
Thank you very much.
Ladies and gentlemen, this was the last question for today. I would now like to turn the conference back over to Marc-Dominic Nettesheim for any closing remarks, and with that, thanks to all of you for your interest, for your questions.
Thanks to you, Carsten, for your answers and the lively discussion. We from Investor Relations are happy to continue the discussion offline and in meetings in the weeks to come, and in that sense, I wish you all a very nice afternoon. Goodbye. Talk to you soon.
Ladies and gentlemen, the conference is now concluded. Thank you for choosing Chorus Call, and thank you for participating in the conference. You may now disconnect your lines. Goodbye.